When it comes to retirement, women are in a much worse place across the board than their male counterparts, reports Morningstar. Lower lifetime earnings for women compounded with longer life expectancies than men means that women by and large are facing a retirement crisis that will see them with not enough money in retirement. (The studies weren’t able to speak to nonbinary individuals, as there simply isn’t enough data available yet on their financial experiences.)
Plan for Earlier Contributions
One of the primary ways that a financial advisor can help their female clientele when it comes to retirement planning is to recognize that earnings for women typically peak earlier in their lifetimes than men’s. Those peaks are also generally much lower due to wage inequalities as well as women either reducing working hours or stepping away from work altogether as primary caretakers for elderly parents or children.
Studies have found that two times as many adult daughters as sons are providers of care services for elderly parents, and three times more mothers quit to care for children or family members than fathers. The needs and timing of caretaking is difficult, if not impossible to predict, but knowing that a woman’s income is likely to peak earlier can help advisors better position contributions and savings.
Two key times when women should be focused on retirement contribution, given all of the above factors, are during their early employment years when they can benefit the most from compounding, as well as their early-to-peak earning years when they can feasibly contribute the greatest amount of money to retirement.
The Role of Risk for Women Investors
A broad overview of investment risk habits has shown that men are generally more willing to engage in higher risk investments than women, but the authors of the article attribute this to the gender income gap. With women having less income and therefore less available capital for investment, their margins for error are much slimmer, and therefore their willingness to invest in risk is often greatly diminished.
The authors did find that when accounting for demographics and aligning comparisons based on income, ages, and plan balances, the differences become smaller, and investment appetites were found to be more similar between women and men. Women who utilize professional financial advice see their asset allocations more closely align with their male counterparts, as financial advisors are able to assess what an appropriate amount of risk is for their individual retirement circumstances.
Nationwide a variety of actively managed ETFs for advisors that cater to a range of investment exposures and strategies for those seeking retirement income options for their clients as part of their bigger retirement planning pictures.
For more news, information, and strategy, visit the Retirement Income Channel.